Metals Markets Falling On Higher USD
Gold and silver remain subdued this week as recent strength in the US Dollar continues to act as a barrier. With the Fed having hiked rates by .5%, and signalling further .5% hikes to come, USD remains firmly in demand. The Fed cited excessive inflation and tightness in the labour market as necessary grounds for such tightening of its monetary policy. With the Dollar index breaking out to multi -year highs last week, both gold and silver took a backseat.
Gold prices are currently down around 7% from the April highs while silver prices have seen over twice that decline, sitting around 15% off April highs. Along with a firmer USD, plunging equities prices have hit silver. Fears over a potential global recession later in the year are starting to weigh on demand for silver. For gold, while lower equities prices would typically feed into safe haven support, it seems the market is preferring to use the Dollar itself as a safe haven vehicle, further weighing on sentiment in the metals market.
Looking ahead this week, the focus will be on US CPI for April. Given the Fed’s hawkishness, further strength in inflation readings will no doubt exacerbate the current market dynamics, leading USD higher and weighing on metals near-term. It will take a proper correction in USD prices to help metals rebound this week so while USD remains supported, both gold and silver look vulnerable to further declines.
Technical Views
Gold
The recent failure at the bull channel top has seen the market correcting deeply lower. For now, price is sitting on support at the 1871.04 level, ahead of the bull channel low. While price holds below the 1919.92 level, the focus is on a further push lower. Bears will need to see a break of the channel low and 1826.71 level support to cause a bigger shift in view, however. Both MACD and RSI are bearish here though the lift in RSI is worth paying attention to.
Silver
Silver prices are at a very interesting technical juncture here. The market is retesting the broken bear channel top as well as the rising trend line support from Q3 2021 lows. While this region holds as support, a further rotation higher is still viable. However, given the bearish readings in both MACD and RSI, the market is vulnerable to a deeper drop should we see a break of 22.3205 with 21.4523 and 19.5643 the next support levels to note.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.